11-10-2007
Darling sends mixed message to small businesses
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With the publication of the Pre-Budget Report yesterday, small businesses might have expected some good news to redress the balance from a disappointing 2007 Budget, but were instead delivered a mixed message of support.
In April this year small business corporation tax was billed to rise from 19% to 22% over a three year period, which was an unexpected blow to SMEs. However, despite CBI expectations of a positive outcome, the government seems to be mixing positive statements with yet more tax burdens.
In the pre-budget report, the government devotes several sections to business and enterprise, offering large cash injections for business innovation & support and skills & apprenticeships. Priorities include: ‘Promoting the creation and growth of business and a strong enterprise economy’; ‘Ensuring that [government] departments deliver better regulation for private and public sector businesses’; and ‘Delivering free and fair markets, with greater competition’.
However, the government has angered business groups by introducing yet more tax increases – this time with capital gains. The Capital Gains Tax rate is set to increase to a single level at 18%, with the intention of taking more back from high earning private equity executives, but experts claim that in the process small companies will also take a hit.
John Cridland of the CBI said: "As pressures on the Exchequer build, and other countries leave us lagging behind in the corporation tax stakes, the temptation to find stealthier ways to generate revenue from businesses grows. But companies have already swallowed a £10bn rise in their annual tax burden and our competitiveness will not stand for further back door business taxes.
"A Planning Gain Supplement would not only hike the business tax burden further - it is a tax beset with practical difficulties and is likely to discourage development, particularly in regeneration areas.”
It is expected that there may now be a marked increase in the number of business sales before the official Budget is brought into play next year.
Other issues highlighted in the report that may affect smaller businesses include: the doubling of air passenger duty paid by customers on business class tickets; the ability for local councils to raise business tax in their area; and closer monitoring of employers when it comes to implementing the rights of employees, especially with respect to parents and carers.
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